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Benefits of Using a Nearshore Call Center as Part of a Collection Strategy

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Top 5 Reasons to Use a Nearshore Call Center as Part of Your Collection Strategy

In the quest to be a competitive collection agency or debt buyer there are many aspects to consider.  A consideration that may not be immediately obvious, but that could have great benefit to an agency is opening a call center through a nearshore office.  We sat down with Phillip Duff of Lighthouse Consulting Inc to ask him, ‘What are the top 5 reasons to consider opening a nearshore office?’”

  1. A quality labor pool

It has been Duff’s experience that the labor pool of Jamaica and other Caribbean Islands has been of a very high quality.  “The members of the Islands’ labor pools are very happy to have employment, so they can take care of their family,” says Duff.  Most of the call centers in countries like Jamaica and Costa Rica are staffed with single mothers while Mexico and Panama are largely staffed by single men.  This means most employees are working to take care of their immediate family including mothers, fathers, sisters, brothers and children. In Duff’s opinion this is “important as the workers are very happy to be employed, motivated to work hard to keep their family’s livelihood and do not express entitlement.” In Jamaica and St Lucia, the call center business is the number two industry on the island. Jamaica has fortune 500 companies established there like Amazon and Xerox. As a result, the island technology infrastructure is solid, increasing the labor force demand for call center workers. Educationally, math and English skills are emphasized in schools so that Islanders will be well qualified for the top industries of tourism and call centers.

  1. Reduced labor costs

According to Duff, Caribbean collectors are both effective and inexpensive. While it is true that expensive customs and duty charges on electronic devices will often exceed 100% of the value of the item, low labor costs offset this expense. Even though setting up infrastructure costs on the islands may be almost double the cost of the same efforts in the US, the low labor costs allow a nearshore call center to offset those costs, increasing the profitability of the business.  Duff claims that Lighthouse has learned that nearshore labor costs “run from $3 to $6 USD hourly in most nearshore locations.”

  1. Familiarity with US culture

Being warm weather tourist destinations close to the US mainland brings US, Canadian, British, German and more varieties of citizens to the Caribbean. The familiarity with dealing with US and other tourists in resorts, beaches, and restaurants makes it easy for native Islanders to perform debt collection to citizens in these same countries. Many of the islands have English as their primary language as they were originally British Colonies. Most Caribbean islands are viewing TV stations from major US cities like Miami, Chicago, and Los Angeles.  Also, Movies as well as HBO, Cinemax and other movie channels keep these islands very familiar with the US culture. In addition, most Caribbean islands also prefer the US Dollar to their own currency because of the stability of the USD.

  1. Ease of management

Due to being located near the US, Jamaica, Mexico, St Lucea, Costa Rica and Panama are all just 2-3 hours from Atlanta or Houston by plane which allows US companies to visit the nearshore call center regularly. Duff quips, “It doesn’t hurt that these locations don’t get snow and almost everywhere there is a beach.”  Duff moved to Montego Bay, Jamaica from the US to open Lighthouse Consulting Jamaica 3 years ago because he fell in love with the Jamaican people and saw opportunities for his clients.   There are opportunities for managed service centers that can make opening and maintaining a nearshore workforce very easy.  Lighthouse is one such group that allows a US business to operate a nearshore office for a fraction of the price of US costs.

  1. Return on Investment

Opening an office nearshore can help an agency reevaluate potential clients as they can have deeper portfolio penetration at the same time as increased production. Having a lower cost office can allow an agency to take on clients that it couldn’t accept previously due to smaller potential profit margins.  According to Duff, agencies “can take on new clients that have a lower unit yield as the cost per seat can be as low as $8-12 USD hourly verses $25-$30 USD per seat in the US for the same work. The bottom line is the workforce costs are up to 50% cheaper and just as effective as US staff, manufacturing an ROI much higher per agent.”

Licensing a Nearshore Branch Office

Licensing a nearshore branch office is similar to licensing a US branch.  Each state has the right to enact its own set of collection laws and requirements.  As such, most jurisdictions have very different statutory regulations and application requirements.

  • Certain jurisdictions require that all locations from which debtors are communicated with maintain a separate branch license. For several states the branch license can be as involved as the original debt collection license application.
  • Some states have an abbreviated branch license.
  • Some states require written notification that the licensed agency is opening an additional branch location
  • At the time of this article, Connecticut and Nevada are two states that do not permit collections from a location outside of the United States.

In all cases, failure to comply with state licensing and registration requirements could prove costly not only to collection agencies but also to the creditors that they represent.  Cornerstone is familiar with the state requirements and can assist an agency in putting these licenses in place.

Connecticut to License US Locations Only

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Update: Connecticut Dept of Banking clarifies collections permissions for agencies who have a Non-USA main location with a USA branch

Public Act 18-173, requires that any licensable Connecticut activity be conducted from an office located in any state of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the trust territory of the Pacific Islands, the Virgin Islands and the Northern Mariana Islands.

If the main office is not in a US location (as stipulated above) and the Collection Agency has a branch that is a US location, then the company can maintain its Connecticut Consumer Collection Agency license requirement allowing collections to take place only from US locations.  Connecticut will require a statement from the company stating that no licensable activity will be conducted from the main office location or any non-US location. Agencies can upload an executed statement from a control person confirming this understanding. This document can be uploaded to the Company Staffing and Internal Policies Section under Document Uploads on the Nationwide Multistate Licensing System (NMLS.)

Update regarding new law (August 24, 2018): Connecticut to take a NO ACTION POSITION for Qualified Collection Agencies

Earlier in August we reported that Connecticut had signed into law an Act that, among other things, stated that the Connecticut Department of Banking would no longer issue consumer collection agency licenses to an office outside of the United States and its territories.

This change raised questions for those currently licensed collection agencies with offices outside of the US.

  • Would the state honor those licenses until their expiration on December 31, 2018?
  • Would they reimburse those agencies for the fees that have already been paid for 2018?

In response to these questions and others, the Connecticut’s Department of Banking issued a memorandum stating that they will take a No Action Position concerning the new requirement that any Connecticut collection activity be conducted from a “state” (US states and US territories) during the term beginning October 1, 2018 and ending December 31, 2018.   This no action position is only for companies or individuals who hold a valid license effective through December 31, 2018.  Click here to review the memorandum in its entirety.

Connecticut will not be issuing new or renewing existing collection agency licenses for an office located outside of the United States or its territories.

Original Post – August, 2 2018: Connecticut to License US Locations Only

Public Act 18-173 was recently signed into law in the state of Connecticut and will be effective October 1, 2018.  The Act makes substantive changes to The Banking Law of Connecticut including the laws that govern Consumer Collection Agencies.  As it relates to licensing, section 36a-801 of the Connecticut General Statutes have been amended to read that, “Any activity subject to licensure shall be conducted from an office located in a state, as defined in section 36a-2.”

Section 36a-2 defines state to mean any state of the United States, District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the trust territory of the Pacific Islands, the Virgin Islands and the Northern Mariana Islands.  In short, the Connecticut Department of Banking will no longer issue consumer collection agency licenses to an office located outside the United States or its territories.

The Act also provides some clarity around licensing for debt buyers by specifically including the term debt buying in the definition of a consumer collection agency and defining debt buying as collecting or receiving payment on any account, bill or other indebtedness from a consumer debtor for such person’s own account if the indebtedness was acquired from another person and if the indebtedness was either delinquent or in default at the time it was acquired.

Connecticut is not putting into place any licenses currently that will be revoked in October.

Maryland Bond Amounts Set to Increase January 1, 2019

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Maryland Bond increase will impact new licenses and renewals effective January 1, 2019.

The Commissioner of Financial Regulation in the Maryland Department of Labor, Licensing and Regulation announced this week that there are mandatory increases to the bond amounts for Maryland Consumer Loan, Installment Loan, and Credit Services Business Licenses. The change becomes effective January 1, 2019.

HB 1297 changes the maximum loan amount under the Maryland Consumer Loan Law from $6,000 to $25,000. The bond is required to be “twice the amount of the largest loan that may be made under the Maryland Consumer Loan Law.” Hence the bonds under these three license types will need to be increased from $12,000 to $50,000. If you have multiple licensed locations, the bond will increase by $50k per licensed location. For example, if you have a Maryland Installment Loan license for your main location as well as 2 branches, you would need a bond in the amount of $150,000.

Cornerstone reached out to the office of the Regulator in Maryland to clarify how this will impact renewals for existing licenses that will expire 12/31/2018. They stated that they will not renew the license for 2019 until the bond has been increased.

Cornerstone will automatically process the increases for our existing bonding clients.

If you have questions about Maryland bonds, electronic bonds, or any other bonding needs, contact Cornerstone today by clicking here or calling us at (888) 650-3240.

Navigating Corporate Changes for Debt Collection Licensing

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Is your company going through changes that may require actions to maintain your collection licensing?

Here are some of the most common corporate changes that could impact your collection licensing:

Navigating Changes

Cornerstone Support has established a reputation over 20+ years as the premier licensing service provider to the collection industry. We’ve frequently had requests to assist agencies that are dealing with civil and/or administrative action related to issues with their state collection licenses. While some are from agencies that did not have a license, surprisingly many are from agencies that unknowingly are out of compliance because they did not appropriately report a corporate change. Though a corporate change may seem trivial to an agency, the consequences of not reporting the change can be costly and significant. Time is of the essence with regard to reporting corporate changes. Don’t get stuck with avoidable fines and penalties by timely reporting corporate changes.

Navigating Debt Collection Corporate Changes - for Debt Collection Licensing

 

Ownership Changes

The statutory regulations for the vast majority of jurisdictions prohibit the transfer of debt collection licenses in the event of a change in the equity positions on the balance sheet of the licensed corporate entity (merger, acquisition, or re-capitalization.) Some level of notification or relicensing is almost always required.

Branch / Call Center Openings

Certain jurisdictions require that all locations from which debtors are communicated with maintain a separate license. Obtaining a branch license can be as involved as the original license or in some cases as uncomplicated as a letter notifying the jurisdiction about the new location.

Officer/ Collection Manager Change

Jurisdictions require notification of a change in corporate officers or a licensed / listed collection manager. Certain states will require background checks be performed prior to the new officer or manager approval. Other states will require managers to take and pass state administered exams prior to the new manager approval.

Address Change

Written notification of a change in the corporate address listed on your licenses is required in most jurisdictions. Certain states will require the surrender of the previous location’s license. Bond riders indicating the new address are also necessary in all states where you must be bonded.

Entity Conversion

Changing from one type of entity to another (ie. from a C Corporation to an LLC) is a significant event in the life of an organization. Reporting this change to the Secretary of State is not enough. Some level of notification or relicensing is almost always required.

Avoid Fees and Penalties, Get Help

These are some of the more common corporate changes that must be reported to the states in a timely manner.  Failure to do so could result in fines, penalties or even loss of license. Safeguard your business by partnering with a licensing servicing company like Cornerstone Support that can allow you to have confidence and help to stay current on all of your licensing needs.  Even if your company that handles it’s own licensing, managing a corporate change may likely require competent outside help to accomplish it in a timely manner.

Governor Signs Amendment Regarding Student Loan Servicing Laws

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Law books balance and gavel - California student loan service statute

Update: California Governor Makes Law Change favoring Debt Collectors

On Friday September 14, California Governor, Jerry Brown, signed into law Assembly Bill 38.  This amendment to the “California Student Loan Servicing Act” clarifies that  debt collectors who collect on defaulted student loans are NOT student loan servicers.  This clarification was important because on July 1, 2018 student loan servicers were required to have a license to operate in California (read below)

Update: Statute Enforcement in California

Effective July 1, 2018, If you service a student loan in California you must first obtain a license.

California’s Student Loan Servicing Act (the Act) 1 provides that, as of July 1, 2018: “No person shall engage in the business of servicing a student loan in this state, … , without first obtaining a license pursuant to this division. “2

The Commissioner of the Department of Business Oversight (Commissioner) is legislatively mandated to administer the provisions of the Act, including applications and licensing. 3 All persons to whom the Act applies, who are engaged in the business of servicing student loans in California, must be licensed as of July 1, 2018.

According to California Financial Code Section 28104 (j)  “Servicing” means any of the following activities related to a student loan of a borrower:
(1) Performing both of the following:
(A) Receiving any scheduled periodic payments from a borrower or any notification that a borrower made a scheduled periodic payment.
(B) Applying payments to the borrower’s account pursuant to the terms of the student loan or the contract governing the servicing.

(2) During a period when no payment is required on a student loan, performing both of the following:
(A) Maintaining account records for the student loan.
(B) Communicating with the borrower regarding the student loan on behalf of the owner of the student loan promissory note.

(3) Interacting with a borrower related to that borrower’s student loan, with the goal of helping the borrower avoid default on his or her student loan or facilitating the activities described in paragraph (1) or (2).

Contact us if you have questions about a California Student Loan Services License.

1 AB 2251 (Ch. 824, Stats. 2016), codified at Fin. Code, § 28100, et seq.
2 Fin. Code,§ 28102, subd. (a).
3 Fin. Code, §§ 28106 , 28112, and 28118.

5 Compelling Reasons To Outsource Collections Licensing

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What are the Benefits of  Outsourcing Collections Licensing?

Navigating the landmines of state license regulations requires an abundance of time and focused energy to stay current and compliant.   Licensing requires that you keep your eye on shifting legislation and knowing the pitfalls of sometimes silly and costly mistakes that generate costly fines and “earnings” downtime..  The usage of an outside firm to handle a function that would otherwise be performed within your company is a sensible practice that affords collection agencies to focus on what they do well.  A small to mid-size agency might not have the staff to manage key functions, while a larger agency may turn to outsourcing to cut costs.

Can you beat the Regulator (Take the 4 question quiz)?

When seeking a Licensing Support Service Provider to handle your ongoing debt collection registration and licensing maintenance, the understood benefits of outsourcing are at the heart of your decision making process.  The maintenance of your debt collection licensing is of vital importance to fulfill a statutory requirement in a majority of US jurisdictions.  It is also necessary to secure and critical to maintain client relationships.  With an Outsourced Licensing Support Service Provider you are able to:

  1. Increase efficiency – Using a licensing support service provider with a comprehensive understanding of the debt collection licensing process, will ensure that your agency obtains and maintains licensing quickly and efficiently, with minimum pull upon internal resources.
  2. Reduce labor costs – The interaction of your staff and the chosen licensing service provider should be only in the form of reaction to your service providers’ requests. Quite simply a member of your staff should be coordinating signatures and non-static corporate information.
  3. Launch ongoing projects quickly – Your chosen service provider should have an established system and efficiencies’ in place to ensure that new projects are capable of launching as quickly as your organization requires.
  4. Focus on your core business functions – With all of the above benefits securely in place, you and your staff can entirely focus your efforts on the money making aspects of your business.
  5. Reduce liability risk– A competent licensing support service provider should have an understanding of the state registration and licensing requirements, consistently tracking legislation and communicating frequently with state regulators to understand nuances in regulator interpretation of existing debt collection. This will mitigate exposure relating to potential civil or administrative action from the states, as well as potential lawsuits from consumer attorneys relating to unlicensed collection activity.

Why should you consider Cornerstone for your Licensing Support Service?

We are the leading debt collection licensing support service provider in the industry, with over 20 years of experience and over 1000 agencies licensed.  Cornerstone has the depth of understanding and experience essential to providing your agency with efficient and effective support.  Cornerstone stands by and guarantees our Comprehensive License Renewal Services, if your agency has provided us with all requested information and your license is not renewed, it is written into our contract that we will pay any penalty or fine incurred.  With our consistent tracking of legislation and the regularity of regulator contact, we will provide your agency with licensing related updates.  Cornerstone’s Licensing portal puts the status of new licenses, copies of existing licenses, and the ability to quickly pull together a licensing compliance report all at your fingertips.

How Will a Supreme Court Shift Impact the Collection Industry?

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As Kavanaugh Looks to Replace Kennedy on the Supreme Court, What Will be the Impact on the Collection Industry?

By Caren D. Enloe (originally posted on Minnlawyer.com)

When news broke that Justice Kennedy would be retiring after a thirty-year career as the swing vote on an increasingly partisan Supreme Court, attention immediately focused on who his replacement would be. Now that Brett Kavanaugh, who currently sits on the D.C. Circuit, has been nominated to fill that vacancy, the next question is what affect, if any, will his presence have on future cases interpreting the federal Fair Debt Collection Practices Act (the “FCPA”) and other federal statutes impacting the debt collection industry. Currently, it is anticipated that at least one debt collection issue will be heard by the court in the next term. The Court recently granted certiorari to determine whether the FDCPA applies to nonjudicial foreclosures. See Obduskey v. McCarthy & Holthus LLP, No. 17-1307. A review of recent cases reveals that Kennedy was a reliable vote for the debt collection industry and suggests that Kavanaugh will likely be as well.

The three most recent Supreme Court decisions affecting the collection industry are Midland Funding, LLC v. Johnson, 137 S. Ct. 1407 (2017), Henson v. Santander, 137 S. Ct. 1718 (2017), and Sheriff v. Gillie, 136 S. Ct. 1594 (2016). In each case, Kennedy’s vote favored the debt collection industry. Midland Funding was decided by a 5-3 margin with Justice Kennedy in the majority. In Midland Funding, the Court held that the filing of a proof of claim on time barred debt does not violate the FDCPA. In Henson, which was Justice Gorsuch’s first opinion on the Supreme Court, a unanimous Court held that a company may collect debts that it purchased for its own account without triggering the statutory definition of a “debt collector” under the FDCPA. Finally, in Sheriff, another unanimous opinion, the Court held that a special counsel’s use of the Ohio Attorney General’s letterhead in their efforts to collect debts owed to the state did not violate the FDCPA.

Will Judge Kavanaugh, if confirmed by the Senate, vote in a similar way to Justice Kennedy in cases affecting the debt collection industry? It’s hard to say, but his appellate record indicates it is likely. During his time as a judge on the DC Circuit, Judge Kavanaugh’s exposure to the FDCPA has been limited. In fact, a search reveals only two cases heard before Judge Kavanaugh involving the FDCPA. In Jones v. Dufek, 830 F.3d 523 (D.C. Cir. 2016), a unanimous panel (including Kavanaugh) affirmed the district court’s granting of a motion for judgment on the pleadings in favor of the debt collector and endorsed the use of a Greco disclaimer. In Molina v. Ocwen Loan Servicing, 545 Fed. Appx. 1 (D.C. Cir. 2013), an action involving mortgage servicing and debt collection, a unanimous panel (including Kavanaugh) affirmed a dismissal of the complaint based upon a lack of Article III standing. It’s worth noting that Judge Kavanaugh was not on the panel that decided the court’s recent high-profile Telephone Consumer Protection Act (“TCPA”) decision, ACA Int’l v. FCC, 885 F.3d 687 (2018). In that matter, the D.C. Circuit sided with ACA International, a national industry trade group, in its challenge of the FCC’s Declaratory Ruling concerning the TCPA.

Not surprisingly, Judge Kavanaugh has heard multiple cases involving the CFPB. For instance, Kavanaugh wrote the panel decision in PHH Corp v. Consumer Fin. Prot. Bureau, 839 F.3d 1 (DC Cir 2016) striking down the provision allowing the agency head to only be removed for cause. The DC Circuit ultimately granted en banc review in that case, and Judge Kavanaugh dissented along the same lines when the en banc court held that the CFPB’s structure was constitutional. Kavanaugh also wrote for the Court in State Nat’l Bank of Big Spring v. Lew, 795 F.3d 48 (DC Cir 2015), and held that a bank regulated by the CFPB had standing to challenge the constitutionality of the agency.

Outside of the debt collection context, Kavanaugh is considered a strict constructionist who believes judges should “strive to find the best reading of the statute, based on the words, context, and appropriate semantic canons of construction.” These tendencies, Kavanaugh’s perceived skepticism of the CFPB, and his votes in Jones, State Nat’l Bank and PHH Corp suggest that, if confirmed, he may be a reliable vote in cases affecting the debt collection industry.

Update for Washington Student Loan Servicing Laws

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Update: Statute Change in Washington

The Washington State Department of Financial Institutions began accepting applications July 16, 2018 from Student Loan Servicers as part of the implementation for E2SSB 6029.  Attention, Student Education Loan Servicers are now subject to Regulation under the Consumer Loan Act, chapter 31.04 RCW, by passage of Engrossed Second Substitute Senate Bill 6029.

According to the Revised Code of Washington Section 31.04.015 (35), “Student education loan servicing” or “service a student education loan” means:
(a) Receiving any scheduled periodic payments from a student education loan borrower pursuant to the terms of a student education loan;
(b) applying the payments of principal and interest and such other payments with respect to the amounts received from a student education loan borrower, as may be required pursuant to the terms of a student education loan;
(c) working with the student education loan borrower to collect data, or collecting data, to make decisions to modify the loan; or
(d) performing other administrative services with respect to a student education loan including collection activities. “Student education loan servicing” does not include third-party student education loan modification services.

The Department of Financial Institutions is working on implementing E2SSB 6029, the Student Loan Bill of Rights, which amends the Consumer Loan Act, RCW 31.04. Student Education Loan Servicers will have licensing, examination and compliance obligations under the Consumer Loan Act.  See: E2SSB 6029

Student Education Loan Servicers must obtain a Consumer Loan License for the main office location and a Consumer Loan Branch License for any other locations servicing student education loans for Washington State Consumers. These applications are filed through the NMLS system.

Need more information regarding this license?  Let us help.

Do You Have a Fully Developed Cybersecurity Approach?

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finger print on keyboard - cyber security program

People, Processes, and Computer Technology: Three Essential Parts of Your Security Program to Protect Non-Public Personal Information.

Introduction: Information Security is a Program, Not a Product

“If you think security is a technology problem, then you don’t understand the problem, and you don’t understand technology.”– Bruce Schneier, Computer Security Professional.

Every “financial institution” (including third-party debt collectors and collection agencies) must maintain, pursuant to the GLB Safeguards Rule[1]  (“Safeguards Rule”)  a comprehensive information security program to protect “non-public personal information” (“NPPI”) of consumers.

Technology makes protecting NPPI more challenging. While computing power, practically unlimited storage capability, and broadband networks all offer substantial potential benefits to financial institutions and their customers alike, interconnected computer networks also present significant and evolving risks to the security of NPPI.

A seemingly reasonable reaction might be to look for the computer technology tools that will “solve” all potential security problems. But no computer technology product or service alone will satisfy the Safeguards Rule or protect NPPI.  Put another way, using appropriate tools like firewalls, encryption, and anti-malware software is necessary, but not sufficient.

Recognizing that technology is not a cure-all, the Safeguards Rule requires that an effective security program combine people, processes (usually written down as policies), and appropriate computer technology. No financial institution will protect NPPI properly unless the security program is strong (and stays strong) in all three areas.

fist pound - hands in over desk

1 – People: Authority and Oversight

To underscore the importance of people in protecting NPPI, consider the consequences of human error in connection with breaches of sensitive information:

Target (credit card and personal data of more than 110 million customers):

“The breach  . . . appears to have begun with a malware-laced email phishing attack sent to employees at an HVAC firm that did business with the nationwide retailer, according to sources close to the investigation.”[2]

South Carolina Department of Revenue (3.9 million tax returns and 387,000 credit and debit card numbers exposed):

“A malicious (phishing) email was sent to multiple Department of Revenue employees. At least one Department of Revenue user clicked on the embedded link, unwittingly executed malware, and became compromised.”[3]

Given that people are often the weak link in the security chain, the Safeguards Rule emphasizes the importance of human oversight of and involvement in, an information security program.

Designate an employee or employees to coordinate your information security program. (16 CFR Section 3.14.4(a)).

The person or people dedicated to coordinating the program must have the authority, the funding, and the trust of management. Promoting a culture of security starts at the top, not just in the message from the CEO or the Board of Directors communicating the importance of protecting NPPI, (the talk), but also in the resources (in personnel and otherwise) devoted to building and maintaining that culture (the walk).

The program coordinator(s) must oversee the implementation of clear, well-documented policies (described below), make sure those policies are followed, and administer appropriate discipline when those policies are violated. This security professional also quarterbacks regular training for employees, especially those who will handle NPPI, and makes sure that the security program is reviewed periodically and updated.

The increasing complexity of all these technology tools makes oversight seem very difficult at best. When feeling overwhelmed by the pace of change, shift focus from the technology itself and to the likely risks associated with NPPI and how to minimize those risks. The leadership of a financial institution cannot be expected to understand in minute detail how encryption works, the way a server backup takes place, or how to create the software code that runs on its computers.

But that does not mean that leadership gets a pass from asking tough questions and evaluating risk in the same way it does in other parts of the business. That means 1) be actively engaged; 2) ask thoughtful questions; and 3) exercise independent judgment. This also means having a process whereby significant security incidents are escalated to leadership, holding employees accountable for managing IT risks, and making sure that the appropriate amount of independent audit and oversight takes place.

Assure that contractors or service providers are capable of maintaining appropriate safeguards for NPPI, and require all such third parties, by contract, to implement and maintain an information security program. (16 C.F.R. Section 314.4(d)).

If a financial institution is putting NPPI into the hands of third parties, the financial institution must exercise risk management over the third-party vendor contract “lifecycle”: to include planning, vendor selection, contract negotiation, and ongoing oversight. As cited often, you can outsource the technology services, but you cannot outsource the risk.

pointing at a essential rectangle in a flow chart

2 – Processes: Standardize and Implement

“If you can’t describe what you are doing as a process you don’t know what you are doing.”– W. Edwards Deming

 Develop an appropriate program that is written in one or more readily accessible parts. (16 C.F.R. Section 314.3(a)).

Put bluntly, even the most sophisticated computer technology is useless (or worse) if a financial institution doesn’t have processes in place to make sure hardware and software (and your physical facilities too) are managed properly to protect NPPI.

As a result, policy implementation will most certainly require the adoption and use of checklists, training, and enforcement to turn policy documents into actual compliance and effective security.  As an example, a policy prohibiting employees from “taking work home” on their laptop computers is important (especially when NPPI is involved), but meaningless unless the financial institution has considered how to make sure that policy is communicated, followed and enforced.

In other words, can you achieve a “culture of compliance and security” that matches the compliance and protection you describe in your policies? For more on this (admittedly broad) topic, I highly recommend Atul Gawande’s The Checklist Manifesto: How to Get Things Right.[4]

Some of the crucial processes/policies for protecting NPPI include:

  • Controlling Access/Privileges
  • Configuring, Hardening, Updating/Patching, and Monitoring All Software, Hardware and Services
  • Incident Response
  • Business Continuity/Disaster Recovery
  • Encryption/Secure Transmission
  • Remote Access (Employees and Customers)
  • Acceptable Use
  • Mobile Device
  • Social Media
  • Information and Device Retention and Destruction

Do not assume these are all “technology” policies beyond the reach of your understanding or solely within the province of IT. Part of the oversight responsibility involves making sure that these policies are understood and followed. If you can’t make a process part of your routine, then how can you expect your employees to follow that same directive?

Effectively communicated policies also help narrow the “expectation gap” between employees who believe that they can use workplace facilities (for example, email) for personal communications, and a financial institution that expects company computers and networks to be used solely for business purposes.  As the United States Supreme Court observed, “employer policies concerning communication will of course shape the reasonable expectations of their employees, especially to the extent such policies are clearly communicated.”  City of Ontario v. Quon, 130 S.Ct. 2619 (2010).

mouse pointer hovering over security button

3 – Use Appropriate Technology, Too

Of course, capable and informed people who implement maintain, and update appropriate processes will require various computer technologies to protect NPPI. Some tools that may be part of your program include:

  • Encryption of NPPI at rest (while it is being stored). Hard drives, data storage areas, mobile devices, removable media (USBs);
  • Encryption of NPPI in transit (when it leaves your network), especially when sent over public networks.
  • Boundary defense (securing the “house”—your network– from “the neighborhood”- bad actors on the internets);
  • Endpoint protection
  • Intrusion Protection and Detection (secure the “house and its rooms”– of your network– in case the bad guys are already inside)
  • Data Loss Prevention (tools that can detect when NPPI is being sent out of your network without authorization).
  • Access Controls (limit access to NPPI to only those with a business need to use it).
  • Password and Login Settings (strength, required changes, access attempts and automatic locking)
  • Multi-factor authentication as appropriate, especially for remote access.

Conclusion: Update and Adapt (All Three)

Your information security program must adapt as new risks arise, technologies change, employees move in and out, and laws and regulations evolve.  The Safeguards Rule embodies the “constancy of change”:

Evaluate and adjust the information security program in light of developments that may materially affect the safeguards you’ve put in place. (16 CFR Section 3.14.4(e)).

In other words, you must regularly examine how you are protecting NPPI, and make adjustments based upon what you find.

[1] https://www.law.cornell.edu/cfr/text/16/part-314

[2] “Email Attack on Vendor Set Up Breach at Target”, KrebsOnSecurity, February 14, 2013, http://krebsonsecurity.com/2014/02/email-attack-on-vendor-set-up-breach-at-target/

[3] SCDOR Public Incident Response Report, November 20, 2012, Mandiant http://governor.sc.gov/Documents/MANDIANT%20Public%20IR%20Report%20-%20Department%20of%20Revenue%20-%2011%2020%202012.pdf

[4]  http://www.amazon.com/Checklist-Manifesto-How-Things-Right/dp/0312430000

 

Contact Cornerstone if you need quotes for a cyber liability insurance policy, or for a review to make sure your current data breach coverage offers the protection your business needs.

Update: Colorado License Renewal Certificate

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Update: Colorado License Renewal Certificate

The Regulator in Colorado has sent important information to clarify expectations regarding the renewal application. The common question asked by debt collection companies is, “When and how will debt collection companies receive the Colorado 2018-19 renewal certificate and can they operate before receiving approval?”  

The answer from the regulator:  Once your renewal application has been reviewed and deemed complete by the Colorado office, the 2018-19 license renewal certificate will be emailed to the licensing contact provided on the renewal application form. Please note that due to the high volume of renewal applications, it may take several weeks for our office to review your submitted renewal application and email your license renewal certificate. You may continue to operate until your license is issued or denied.

You can always place your trust in the experts at Cornerstone Support, Inc. to navigate keeping your licenses current so that your company can focus on more important business.  Contact us if you have questions on a Colorado License Renewal or if you need help with renewing any debt collection licenses.

What Does it Mean to be Compliant in Today’s ARM Industry?

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What Does it Mean to be Compliant in Today’s ARM Industry?

Back in 1964, the Supreme Court heard arguments in the case of Jacobellis v. Ohio. The case, which centered around the First Amendment, involved the manager of a theater in Cleveland Heights, Ohio, who wanted to show a film, “The Lovers.” The state of Ohio had deemed the film to be obscene and Nico Jacobellis was fined $2,500 for showing it. The fine was upheld by an Appeals Court in Ohio and the Supreme Court of Ohio before it was overturned by the Supreme Court of the United States.

Not many people know about the case, but many will recognize a very popular saying that came from Justice Potter Stewart, who, with the majority, said the manager was protected by the First Amendment and should be allowed to show the film.

“I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so,” Justice Stewart wrote. “But I know it when I see it, and the motion picture involved in this case is not that.”

“I know it when I see it” has become a common expression used by people to indicate the ability to define or categorize something even though the something may not have a definition or category.

“I know it when I see it” can be used in the ARM industry today, as it pertains to compliance. Ask 10 different people to define what it means to be compliant in today’s ARM industry and you will get 10 different answers. How do we know? Because we did just that. We asked a number of executives and compliance professionals in the ARM industry, “What does it mean to be compliant” and every answer was its own snowflake. Every answer was right, and every answer was different.

Compliance has never been more important in the ARM industry and it has never been so ambiguous. Compliance has become a catch-all term that is used to ensure that collection agencies and their employees are following all of the federal, state, and local rules and laws related to collections, to encompass lawsuits filed by individuals or professional plaintiffs agains collection agencies, and to oversee all of the policies and procedures within an organization to make sure that things are being done the right way.

Compliance “means constantly swimming, and never arriving on the shore,” said Alicia McKeighan, the chief compliance officer at Afni, Inc. “It ultimately means having a true passion for what you do because you will never reach the end.”

Knowing compliance when you see it is not nearly good enough for collection agencies today. While someone might be able to look at how an agency operates and get a sense of whether it is compliant, the agencies have to be incredibly thorough and comprehensive in how they approach compliance. There are too many moving parts for anything to be left unnoticed.

The basics of compliance in the ARM industry start with the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act, and the Fair Credit Reporting Act. Those three laws dictate much of what collection agencies can, and can not do, on a daily basis.

“The process begins with knowing the law,” said John Bedard of The Bedard Law Group. “A company must have a deep and broad understanding of all federal, state, and local legal obligations regulating the business.”

But those laws are just the tip of a very big iceberg. And like icebergs, much of what really matters lies beneath the surface.

Every aspect of a collection agency operation has to be looked at through a lens of compliance. Every policy, every procedure, everything that happens needs to be run through the compliance management system. A compliance management system has become the central nervous system of a collection agency; it controls all of the activities within the organization. In asking ARM industry executives about compliance, most of them mentioned, in some way, shape, or form, the importance of a robust compliance management system.

“At the highest level, to be compliant in today’s ARM Industry, one must have a robust compliance management system complete with policies and procedures, training for all staff related to the policies and procedures, processes in place to determine the extent to which the company is following the policies and procedures, processes in place to correct deviations from those policies and procedures, and further processes in place to ensure that the corrections are effective,” said one agency’s chief compliance officer. “That’s the answer you would get from Mr. Spock. In the real world, doing all of the above is like herding cats.”

What makes being compliant such a challenge in today’s environment is that compliance is not a static situation. With every court ruling, what it takes to be compliant changes. Collection agencies need to be regimented in how they approach being compliant, but agile enough to immediately react to any changes that need to be made. A court ruling, especially one in your jurisdiction, needs to be studied and decisions need to be made about possible changes to policies and procedures.

“Compliance, if done properly, allows you to be nimble and to adapt to necessary changes that occur in the marketplace,” said Joann Needleman, leader of the Consumer Financial Services Regulatory & Compliance group at Clark Hill. “Compliance should equal excellence and best in class. It should be considered an investment and not an expense.”

Considering compliance as an investment and not an expense is a difficult concept for many agency executives to grasp. But when you see compliance permeating through every aspect of the business, and what can happen if a lawsuit is filed or a regulator starts an examination, that is when the real problems begin. “You think education is expensive?” a popular saying asks. “Try ignorance.”

Making that investment starts from the moment that an employee walks through the door, whether it is his or her first day on the job or the 10,000th day on the job.

Compliance needs to be ingrained into the culture of an organization. It has to be not just an important part of the decision-making process, but a value that is carried through every interaction with debtors and with clients. Compliance is training and education. Compliance is a mindset, a foundation onto which successful collection agencies are built and allowed to thrive.

It should be noted that Justice Stewart did not think up “I know it when I see it” all on his own. His clerk, Alan Novak, helped coin the phrase. The parallels in collection are similar. Compliance can not be left to just one person inside a collection agency. It takes everyone on the team, being aware of its importance, to ensure that an agency is doing its best to be compliant.

“Compliance is nothing more than: (a) protecting our company; (b) protecting our client; (c) protecting the patient/consumer and (4) protecting our employees,” said Samuel Shannon, the chief compliance officer at AMCOL Systems. “Compliance is one of the jobs in the company that is never finished.”

Outsourcing: Why Should I and How Do I?

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Why Do I Need To Outsource?

I’m always fascinated by the number of conversations that I have with agencies regarding the basic tenets of outsourcing.  While my conversations are specifically related to licensing, more often than not I find myself walking through the more general advantages of outsourcing – those benefits inherent to the idea of outsourcing regardless of industry.

While the next few paragraphs may look remarkably similar to the information on your individual websites and other collateral material I assure you they were not copied.  The truth is that we are all selling the same idea.  We are all outsourced service providers.

Organizations that outsource certain corporate functions that have historically been handled in-house (i.e. collections, licensing, IT, customer service, etc.) do so for a number of reasons.  A few of the more common reasons are provided below:

  • Reduction of Labor Costs

    An outsourced provider with the right volume, operating efficiencies and cost structure should be able to perform the particular operating function at a much lower cost than the organization would be able to do using their own resources.

  • Focus on Core Business Functions

    Internal resources can focus more directly on an organizations core competency and reduce the distractions of operating functions that do not generate revenue.

  • Operational Expertise/Knowledge

    Provides an organization with operational best practice and a wider experience and knowledge base that would be difficult or time-consuming to develop in-house.

  • Scalability

    The outsourced provider should be prepared to manage a temporary or permanent increase or decrease in production levels.

  • Reduce Liability

    An approach to risk management for some types of risks is to partner with an outsource provider who is better able to provide a service that helps mitigate the associated risks.

As you are aware, each state has the right to enact its own set of collection laws and requirements.  As such, most jurisdictions have very different statutory regulations and application requirements.  Not to mention the fact that we are not operating in a static regulatory environment – both the regulations and application requirements are always changing.  The overall cost savings that outsourcing can provide combined with the overall assurance that you are compliant in this ever changing regulatory environment makes outsourcing a compelling option if you are licensed in more than just a few states.  Here are a few questions to ask when selecting a licensing provider:

  • Is collection agency licensing the firm/individual’s core competency?

Collection agency licensing is different than most other corporate registration.  In addition, the states are continually changing statutory regulations and application requirements.  Just because the firm/individual has done some collection agency licensing or does other types of corporate licensing does not mean it will translate to your collection agency licensing project.

  • How long has the firm/individual been providing collection agency licensing services?

Relationships with the various state regulators are important and can only be developed over time.  Furthermore, no two licensing projects are alike and sometimes lessons are learned through mistakes made.  You do not want the firm/individual that you are using learning lessons at your expense.  Even small mistakes can significantly extend the time in which it takes to get licensed.

  • Does the firm/individual guarantee their service?

While no one can guarantee whether or not a state will grant your organization the required debt collection license, they can guarantee that all license renewals and annual reports are filed on a timely basis.  Make sure that if the individual/firm that you are selecting fails to meet a license renewal deadline and you have provided all necessary materials on a timely basis, then they will pay any late fees or penalties that are incurred.

Cornerstone Support has established a reputation as the premier licensing service provider to the collection industry.  We understand the particular nuances of licensing all types of collection agencies and are professionally staffed and trained to get your agency licensed faster than anyone else in the industry.  We realize that your time is best spent on the moneymaking ventures of your business.  In allowing us to take care of your licensing, you can be assured that you are compliant in every state without the stress of managing every detail.

So You Know You Need to Outsource…

Where do you begin?

  • Start with an Audit
    • Hire an independent consultant with an organization that specializes in licensing to help lift the burden off your own employees.
  • Determine if Additional Licensing is Necessary
    • Schedule a call and spend time with a licensing expert reviewing your gaps and any possible additional licensing needs.
  • Conduct a Trial Run With Just a Few States
    • If you’re still unsure about outsourcing your licensing duties, try conducting a trial run. This will help you test the results of your decision to outsource and will allow you to collect crucial data that shows the benefits of your newly implemented strategy.

Need Help?

Contact the experts at Cornerstone Support for an audit or quote!

We’ve been the industry leader in compliance and licensing for more than twenty years. Today, Cornerstone Support continues to recognized as the premier state licensing and compliance service provider throughout the entire United States. We have served as a valued partner to a countless number of agencies, debt buyers and attorneys, alike. With our level of expertise, knowledge, and experience, our dedicated team provides our clients with the best service in the industry.

We are excited to learn more about your organization and see how we can assist you when it comes to outsourcing compliance and licensing activities! Fill out the form below and someone from our team will reach out to you shortly.

Why Do I Need Errors and Omissions Insurance?

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Mistakes happen.  It’s true in every facet of life, and that includes business.  Unfortunately, any professional can be sued or held liable for mistakes made in the course of conducting business.  In our highly litigious society, errors and omissions insurance is a good idea for many types of businesses.  But in the collections industry, this coverage represents a vital layer of protection.

Errors and omissions insurance – also called professional liability – protects professionals from defense costs and damages stemming from lawsuits related to their services.  Most credit grantors will require a collector to carry a certain amount of errors and omissions coverage before contracting to do business with the agency.

An errors and omissions policy is written on a base professional liability form, with a series of policy endorsements that mold the coverage to fit your business. It is important to pay attention to the endorsements, which may enhance or restrict your coverage.

Lawsuits can be extremely costly to defend and settle.  The language in the Fair Debt Collection Practices Act (FDCPA) can be interpreted very loosely, and collection agents can be sued for a wide range of activities including a letter or a phone call to a consumer.  A seemingly benign phone conversation can be construed into “harassment” or “misrepresentation,” and even frivolous claims cost money to defend.

General liability is another type of specialty insurance carried by many businesses, but it is important to note that general liability does not cover lawsuits related to professional services.  Instead, general liability policies cover bodily injury and property damage caused by the insured.  Only errors and omissions policies protect against FDCPA claims and other similar allegations.

Errors and omissions rates can be expensive in the collection industry due to the high frequency of claims.  As with any purchase, it is important to shop the market to make sure you are getting the best rates and coverage for your business.

 

Why Start a Company in a Regulated Industry?

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We are nearing the end of the sales pitch, and the exec I’m speaking to is almost convinced. I feel it: he likes the product and likes the innovation but he has to ask; he can’t let me off the hook.

He leans forward and looks me right in the eyes. And then it comes. The question.

“Tell me more about your Compliance Management System.”

Without a word, I reach into my bag, and grab a folder. It’s massive with hundreds of pages, all properly categorized: FDCPA, TCPA, FCRA, ECOA, GLBA, you-name-it. Here are the results of hundreds, maybe thousands of work hours. I slap it on the table, and it makes a loud noise even in this cavernous conference room.

We both smile. I passed the test.

I confess, my dreams have been weird lately. This is what being a founder in hard-core financial services feels like. You should be ready for prodding questions, a lot of upfront investment, and heavy oversight. We aren’t alone: companies like Standard API, LendUp, Even, Vouch, Blend Labs and others all operate in highly regulated industries. So why take on a challenge like this, instead of building a messaging app, or a video-streaming app? Why work on “boring” problems, when you can build something that bloggers will muse about and any angel investor can love?

For my co-founders and me, and for others like us, the answer is three-fold: 1) solving real problems, 2) solving hard problems, and 3) unlocking huge opportunities. A heavily regulated market is a clear signal for all three.

  1. Solving real problems

77 million Americans have a debt collection related item on their credit report. 106 million are unbanked or under-banked. 5.5% of adults nationwide have used a Payday Loan in the past 5 years. Think about these numbers: these are real people with real financial problems. They struggle daily.

I don’t know if there’s a financial bubble in tech, but there’s definitely a cultural one; many of us build meta-startups that help other startups get built or are plain me-too’s. We sometimes work on cool ideas that aren’t too meaningful. I once had an engineer decline an offer to fix debt collection, only to work for a mobile gaming company and promote modern day gambling.

I want my work to touch real problems because that’s how you make a difference outside of our echo chamber. Increased regulatory scrutiny comes on the heels of unscrupulous business tactics that exploit human suffering – real problems that need solving.

  1. Solving hard problems

Did I mention we spent thousands of hours on our compliance policies? It didn’t stop there. Replacing dial-for-dollars call centers with a machine learning system takes time and dedication. So does underwriting mortgages or short terms loans. These industries require an understanding of human psychology, risk management, data science, predictive analytics, customer care – and all has to be delivered to pass intense regulatory scrutiny. Lending, collections and similar processes have been done manually for decades because building a machine to make nuanced decisions is hard. It’s hard to accumulate the data required to optimize them. It’s also hard to convince investors to be patient; the pool of funders and founders they are willing to support, is surprisingly small. That’s a worthy challenge. Again, regulated markets tend to create entrenched incumbents with little incentive to change – exactly where disruption is needed.

  1. Unlocking huge opportunities

Payday lenders’ annual revenues are estimated at $11B. Debt collectors’ are at $15B. Thousands of companies pop-up in both markets due to surprisingly low barriers to entry, and disappear due to the complexity of continuous operations. Increased regulation favors organized, well-funded market participants that can consolidate that activity in a way that is demonstrably better than the incumbents’ approach. Technology can help us solve these problems at scale, with convincing economics, and a compelling case for compliance and information security. Here, too, regulation signals the amount of money that flows through these markets – and the size of opportunity for those who can play.

Bottom line

Regulated industries present unique challenges, and require a mindset that combines technical daring and innovation with respect to the legal framework. When you do engage, though, they can present interesting, challenging problems that have huge impact and many opportunities. This, for me, is worth the hassle.

4 Ways to Get the Most out of Trade Shows and Conferences

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Trade Show

We try to attend a conference or trade show at least once per month. This keeps us up to date on the latest in the industry and allows us to constantly connect with many industry partners, clients, and friends.

Attending an industry event allows you the opportunity to not only step away from the office and learn something new but also provides some great networking opportunities. However, once you arrive, these events can be overwhelming, especially if you don’t attend them often. As someone that attends these multiple times a year, we’re here to provide some advice for your next scheduled industry event, sharing the things we’ve learned along the way.

4 ways to get the most out of your next conference or trade show event:

  1. Bring business cards. The main thing you want to get out of most trade shows and industry events is networking. You’ll probably meet a lot of people so don’t just bring business cards to hand out, but make an effort to collect them as well. As you collect cards from others, make notes on the back of the cards to remember key points about your conversation. This makes things easier when you get home with 50 cards and can’t remember who you talked to what about.  
  2. Research. Take the time to do your research and learn more about who will be attending, where the best place to stay is, and even the best way to get to/from the event. Showing up without any knowledge of the area and conference is one of the reasons these events can be intimidating. If you do your homework, you’ll be able to plan and strategize for the event.  
  3. Plan ahead. Using the research you did, make a list of people and companies you want to find and talk to. Know where these companies will be located and have a strategy in place. Who are you visiting first? Is there a layout/walking path that makes the most sense for you? This will allow you to make the most of your time and accomplish everything/meet everyone on your list. Here are a few things to keep in mind: 
    1. Pre-register for the conference
    2. Set appointments with any vendor you want to make sure you talk to
    3. List seminars you want to be sure you attend
    4. Make a schedule (including the above)
  4. Stand, don’t sit. Make the most out of your time at these events! It can be tiring and sometimes include a lot of walking, but it’s worth it. Afterall, some of you are attending just to get away from sitting at your desk all day. (Just make sure you pack comfortable shoes!)

Other things to keep in mind:

  • If flying to the event, keep enough room in your suitcase for any items you may be bringing back.
  • Request samples to be mailed to your office rather than taking them home with you.
  • Do a follow-up self-evaluation. Were your objectives met? Did the cost of the event prove worth it to what you learned and gained?

Keep this list on hand and put it to use at your next conference or trade show. And if you have a favorite event you attend often, let us know about it! We are always looking for new events to attend and would love to hear yours. And as always, if you’re attending an event with us in the future, please come say hello! We would love to meet you.

Reduce Lawsuits and Increase Collections with Words That Work

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Words the Work

Guest Post by Mary Shores

Think of a time when you had to call consumer service. How did you feel before you made the call? What about during the call, and after you hung up? Many would say we experience frustration, anger, disappointment, or confusion. Now it’s time for the big question: how do your consumers feel after talking to your company? Perhaps it’s the same feelings just mentioned? It’s time for a better way.

If you want to make the collection or legal process less painful, make it less of a process and more of a connection. There is the stereotype of the aggressive and shaming bully of a debt collector or attorney for a reason. Mary Shores changed the way we approach the consumer at our company and it has made a big impact on our clients, our consumers, and ultimately our bottom line. At Midstate Collection Solutions, we focus on making people feel good about paying their debt because we know that having a debt is a burden on both the consumer and the client; we want to be the solution. Changing the industry perception has been a vision of Mary’s for years—she is working diligently to prove that collection agencies and attorneys are not the bad guys that people make them out to be, and her innovative approach to communicating is doing just that. Within the first year of implementing this new communications strategy, our revenues increased over 33%, allowing us to collect more money from consumers while reducing lawsuits and work towards our goal of improving the industry perception!

The way we communicate with others has a significant impact on the end-result of the interaction. For example, studies have shown throughout the years that the probability of a physician being sued by a patient can be determined within the first few minutes of their interaction solely based on how they communicate with their patient. Now apply this same principle to your company. Your consumers are more likely to file a lawsuit against your company based on your communications with them and how they feel they are being treated.

What if you, too, can radically decrease the probability of lawsuits and increase your success in collections within your organization just by simply changing the way you communicate with your clients and consumers? Words That Work can do just that.

What is “Words That Work”?

Mary’s innovative three-step communications philosophy is based on psychology, neuroscience, and biochemistry. This radical system is effective because it empowers staff, creates consistency, and increases overall satisfaction.

Words That Work is comprised of 3 rules:

  1. Stop Saying Negative Words
  2. Start Using Words That Work
  3. Always Say What You Can Do
Stop Saying Negative Words

We have a Do Not Say List that all employees must follow at our company. The top six words on this infamous list are: no, not, can’t, won’t, however, and unfortunately. All of these words plant giant seeds of negativity, subconsciously reinforcing a negative outcome in the situation. Another issue that falls under negative words is passive phrasing, such as “Is there any way you can pay this today?” Eliminate negative words first, and you’re well on your way towards your goals of decreasing lawsuits and increasing collections.

Start Using Words That Work

Based on psychology, neuroscience, and biochemistry, Words That Work is made of words and phrases that trigger positive or relaxing emotions taking your staff and consumers out of fight-or-flight and putting them in rest-and-digest. The sympathetic nervous system is responsible for aggression, anxiety, negative perceptions, increased attention to negative stimuli, and recall of negative experiences. When activated with Words That Work, the parasympathetic nervous system balances out that reaction by promoting growth and regeneration, building loyalty and rapport, feeling relaxing emotions, and increasing the likelihood of being open and receptive to communications.

Always Say What You Can Do

Telling the consumer what your next step is in the process sets proper expectations, builds confidence and rapport, and informs the consumer of the solution all while simply stating what the next actions are going to be. Sometimes you don’t always know what you can do in the moment, or you may need to look into the situation further before coming up with a solution. When you need more time to look into the consumer’s account or come up with a solution, be honest, and set a realistic expectation of when you will get back to them.

3 Steps to Using Words That Work

Now that you know the 3 rules of Words That Work, here’s how you apply them in your communications.

1. Validate—When you validate the consumer, it lets them know you heard and understand them. You build rapport and trust. It’s important to note that validation does not necessarily mean you agree with what it is the consumer is saying; you’re just consciously acknowledging what they’re telling you so they understand you’re actively listening to their concerns and situation./p>>

“I appreciate you sharing that with me.”

2. Plant Seeds of Happiness—By using powerful words, you assure the consumer that you are doing everything in your power to resolve their concerns.

“I can definitely resolve this problem for you.”

3. Use an Action Statement—This empowers you to remain in control of the conversation, sets proper expectations, and instills confidence in the consumer that you are going to help them.

“What I can do for you is…”

Implementing Words That Work as simple as rephrasing what most employees already say. For example, if someone is trying to schedule an appointment and there’s no availability right away, try rephrasing like this.

Stop Saying: I’m sorry—unfortunately, I don’t have an opening until next week.

Start Saying: I have great news! An appointment just became available! I can schedule you for Monday at 10 am.

Tying It All Together

Take a bit of time each day to focus on becoming aware of what you say to reduce your chances of facing litigation, improve your success in collections, and build a more positive reputation for your company and for the clients you represent. Slowly weed out negative words, replace them with Words That Work, and tell people what you can do for them. Always validate either the positive or the negative statements you’re being told. Your next step is to plant a seed of happiness and end with an action statement to present your solution to significantly improve your consumer service outcome. If you tell someone what you can do for them, they’re less likely to be upset when they can’t have things their way.

Here at Midstate Collections, we are always striving to educate, empower, and entertain you to take inspired action. It is no secret that communication is a powerful tool. Creating and delivering consistent information to consumers empowers your staff to know there is always a solution. Having access to all these resources helps your staff to feel confident and provide quality results every time. Applying Words That Work in your work will be more challenging than you may expect. You are breaking old habits and configuring new neural pathways in your brain. If you have any questions or would like any guidance at all on how to use Words That Work, Maghan Moslander, the Business Development Coordinator at Midstate Collection Solutions, would be thrilled to hear from you.

We have a free workbook resource based on this article if you are ready to start implementing Words That Work in your organization and want to complete exercises to help take you to the next level. Request your free workbook for this training by emailing Maghan Moslander at [email protected]

What We Learned From ACA Convention

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Seattle - ACA Convention

A few weeks ago the Cornerstone team arrived in Seattle for the ACA International Convention & Expo. It was a great time to connect with clients and friends as well as hear the latest updates for the industry. We’re sharing some of the things we learned below.

The topic of the CFPB’s future under the new administration was a major point of conversation at the ACA Convention. Although the consensus was that all the moving parts involved render projections virtually impossible, there were two recent events that were points of interest:

The Treasury’s report on the CFPB- 24 April, 2017

  • The Treasury released a very candid report about the CFPB and included the following points:
    • The CFPB’s structure renders it unaccountable
    • The CFPB created marketplace uncertainty by maximizing discretion
    • The Consumer Complaint Database lacks appropriate safeguards
    • The CFPB’s supervisory authority is duplicative and unnecessary

Cordray’s Remarks– 8 June, 2017

“As we evaluated the feedback we received on the proposals under consideration, one thing became clear. Writing rules to make sure debt collectors have the right information about their debts is best handled by considering solutions from first-party creditors and third-party collectors at the same time. First-party creditors like banks and other lenders create the information about the debt, and they may use it to collect the debt themselves. Or they may provide it to companies that collect the debt on their behalf or buy the debt outright. Either way, those actually collecting on the debts need to have the correct and accurate information. All of these parties must work together to ensure they are collecting the right amount of debt from the right consumer.”

If you’re interested in talking more about what we heard at the ACA Convention, feel free to reach out to us.

More pictures from our trip to Seattle:

Seattle

Seattle

Supreme Court Ends Theory of Liability under FDCPA

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On May 15, the U.S. Supreme Court put to rest a theory of liability under the Fair Debt Collections Practices Act (FDCPA or Act). This has a major impact on both the credit and collections industry as well as bankruptcy practitioners who represent creditors.

The court found that “the filing of a proof of claim that is obviously time-barred is not a false, deceptive, misleading, unfair or unconscionable debt collection practice” under the FDCPA, reversing the judgment of the Eleventh Circuit.

Three things were found in this case:

  1. State law determines whether a person has a “claim” or “right to payment” – In this case, the law of Alabama says a creditor has the right to payment of a debt even after the limitations period has expired.
  2. A Proof of Claim is Not a Civil Lawsuit – The filing of a lawsuit to collect a debt beyond the statute of limitations is in fact an FDCPA violation.
  3. The FDCPA and the Code serve separate purposes – With the FDCPA, the Acts work to protect consumers by preventing consumer bankruptcies in the first place. The Code creates and maintains the delicate balance of a debtor’s protections and obligations.

The courts have spent many years stretching the Act beyond what Congress had intended. The FDCPA has seen many interpretations due to a lack of regulation. This case is just another example.

View the full update on this case from InsideARM here.

20th Annual DBA Conference

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The Debt Buyers Association, International (DBA) recently celebrated their 20th anniversary at their annual conference in Las Vegas, NV. We had a chance to attend the conference again this February. More than 900 people were in attendance this year (the conference hosted roughly 60 attendees in 1997). 

One particular session at the conference included five past DBA presidents, who each shared their collective wisdom by telling tales of how the debt buying industry has moved from a “cowboy culture” in the early days to a “consumer friendly” culture in recent days.  In the early days, it required great trust in the people you were working with.  The industry was desperate for an organization to become the standard bearer.  This is the role that the DBA has sought to provide over the years.

The debt buying industry has moved from a cowboy culture to a consumer friendly culture.

Throughout this session, each of the previous presidents helped attendees to understand that in the early days (circa August of 1996) debt buying was just an experiment done by a few banks.  Debt purchasing didn’t initially fit into any category as a brand new and fast-growing industry.  As time went on, it became very necessary to legitimize the practices of debt purchasing.  There was a need for a credibility standard in the industry as well.  Today, the membership of debt buyers has grown into a comprehensive industry. 

The DBA has helped educate and advocate with state and federal regulators who have also grown in their understanding of the growing industry.  The DBA has worked over the last 20 years to have a seat at the table of decision makers to help shape the industry. 

The Trump administration takes aim at rolling back regulations, such as revisiting the Dodd-Frank legislation. It is possible that Federal regulations may be reduced.  The state regulations, however, will likely stand firm, often picking up where Federal regulations may be letting go.  The DBA collectively remains cautiously optimistic that their relationships that have been built over 20 years will continue to provide the industry standard of education and advocacy.

While the DBA celebrated their 20th annual conference, we also celebrate our 20th year as a company in the debt collection and debt buying industry.  As the industry has grown, we’ve had the privilege of helping hundreds of companies manage their licensing, bonds and insurance.  Let us know how we can help you!

President Donald Trump and the CFPB

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The story our entire industry is keeping our eyes on: President Donald Trump is considering a replacement for Richard Cordray, the current director of the Consumer Financial Protection Bureau (CFPB).

This is huge news for our industry, as Trump is considering and met with former Rep. Randy Neugebauer as the replacement. Neugebauer has recently been very vocal in his criticism of the CFPB’s actions and its current structure.

“Unfortunately, the CFPB’s efforts represent yet another example of a Washington-knows-best mentality. Using behavioral economics, which by its very principles says policymakers should make choices for unsophisticated individuals, the CFPB has set down a road of paternalistic erosion of consumer product choice and access to credit.” – Randy Neugebauer

The CFPB is currently regulating our industry out of business. But there is a lot of optimism that new leadership will understand the value that our industry brings to the overall economy and regulates from that perspective.

Donald Trump’s ability to replace Cordray and appoint a new CFPB director might hinge on the results of the PHH v. CFPB case rehearing. The rehearing is being handled by the D.C. Circuit Court of Appeals, which will have to decide whether to uphold the October ruling that CFPB is unconstitutionally structured. If the court does uphold the original ruling, Trump will be able to remove Cordray at will and the bureau could be required to restructure and/or lose its status as an independent agency.

This gives our industry a huge sense of optimism when it comes to our future.

You can read further details here.

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